The thankful one

Stocks plopped a bit Friday after the latest jobs numbers. No wonder. This is big stuff.

In Canada a wave of part-timers surged the employment stats skyward. In the States, it was all about wages. They’re up almost 3%, racing past inflation, making people feel silly and richer. The jobless rate in America is 3.7% (everybody’s working who wants to), the lowest since I had a folk-rock group and wore Beatle boots and bangs.

So now the market’s worried about inflation. Rightly so. That means higher interest rates. Thus US bond yields are surging way past 3%. That spells competition. After all, why risk money buying stocks paying 3% or 4% which could lose capital value when you can get a risk-free government bond coughing out 3.2%?

The boffo American jobs performance seals the next rate hike in a few weeks. There will be three or four more in 2019 thanks to the Trump effect outlined here a day or two ago. Tax cuts, fewer regs, trade walls – all of this has thrown gas on the fire. The bond market can see that, and yields are racing higher because (as stated) it means inflation – which makes bonds worth less. (Remember that bond rates and bond prices are inversely correlated.)

Now some people have told you US rates are heading for an inverted yield curve, which sounds painful. They argue this normally signals a recession, which is why they’re out buying tinned tuna and going to cash. But that’s no longer the case, as blog dog (and Van-based financial analyst) Hans Knapp pointed out to me late Friday:

Sadly I have no dog picture to share with you, but after the recent upheaval in bond rates, including today, I decided to compare the US yield curve to where it was a month ago. In an interesting retort to those who claim the yield curve is about to invert, you can see that the longer end of the curve moved up at the same amount as the short end.

The conclusion from this is that, for the first time this credit cycle, the market is beginning to price in the prospect of possibly higher rates over the long term. If that comes to pass, it could have profound impacts on asset prices such as homes not just in the short term, but the longer term as well.

And here’s the proof – you can see that rates (short & long) are coursing higher. Yup, that clearly suggests markets expect this is the real deal. Higher rates as the new normal. The Fed will not stop until gobs of stimulus have been removed.

So last week there were more than 80 Canadian lenders which raised mortgage rates on various terms. More increases coming. The job numbers in Canada are good enough to ensure this happens, even though incomes here are lagging. Concurrently, inflation has shot up to 3%, the point at which the Bank of Canada starts drinking heavily. So, expect an increase on October 24th.

Meanwhile mortgage broker and analyst Rob McLister says anyone thinking of borrowing a mortgage needs to keep an eye on the Canada 5-year bond yield. “There’s a good chance the 5-year yield could approach 2.50% before too long. That would take 5-year fixed rates up another 15+ basis points, which would cost 5-fixed borrowers $1,780 more interest over their term on an average $250,000 mortgage.”

Well, check out the yield now. This is why mortgage rates will swell, then stay there.

“If you need a fixed-rate mortgage in the next 120 days,” says Mortgage Rob, echoing advice here of several days ago, “protect yourself and lock one down this week.”

Or, you could just listen to Andrew. His Thanksgiving lesson: life’s about flexibility and choices, not stuff and debt.

I am thankful for your blog. And I am thankful for being a renter.

My family does not have huge savings, nor do we have a high income. But, by shunning the debt that has become commonplace, we have been able to weather some storms that would have otherwise sunk us financially. I was able to close my first business, despite it not being successful, and still pocket some cash from it. I was able to quit a miserable job without another job to take its place. I was able to work truncated hours in order to go back to school part time.

None of this would have been possible if we would have taken on the debt of a large mortgage. I will happily pay someone else’s mortgage for the freedom we have from being debt free. So, I’m thankful this Thanksgiving for being a renter.

Again why the fear of RE? You’re saying economy won’t go into recession so why scare people from buying RE? If no recession they can afford homes just fine. Besides $1,750 more on a 5 year term??? Is that all?? I’ve waited a decade of fear mongering that increasing interest rates will crash houses and after all this it’s only gonna cost $350/year after 9 int rate increases????? Garth, honestly.

As for Andrew, I am confused, this is supposed to be a G7 country, No?
What financial storm, what miserable job, what debt and large mortgage?

Here everybody is rich, life is beautiful, there is plenty of energy and young people everywhere, economy is booming, constant influx of rich immigrants, real estate will keep going up as everyone wants to live here (it is very cheap, ‘buy now or be priced out forever’, but ‘always is good time to buy’ ?!?, ‘your missed the train’,…), prices are going down (there is ‘deflation’) wages are going up.

Then you wake up with the fingers in the outlet and with your derriere applauding…

US is mired in debt and adding more everyday with no end in sight. As soon as we see the stock market go down due to rising rates, the fed will have to back off and start lowering them since politicians lack gonads.

Might pay u nominally….but it will lose its purchasing power through inflation

#4 Alessio on 10.05.18 at 5:56 pm
Again why the fear of RE? You’re saying economy won’t go into recession so why scare people from buying RE? If no recession they can afford homes just fine. Besides $1,750 more on a 5 year term??? Is that all?? I’ve waited a decade of fear mongering that increasing interest rates will crash houses and after all this it’s only gonna cost $350/year after 9 int rate increases????? Garth, honestly.

As the sheeple here is very dumb, you have to spoon feed it the truth, slowly at times, as you loose any ‘credibility’ with it otherwise/if you tell it straight.

It is like playing with kids/with juvenile tantrum.
If you tell them the truth they tell you that they don’t like you.

It is denial-ism, ignorance, rejection of reality, fear of reality, refusal to acknowledge anything deviating from or contradicting your believes or undermine your perceived ‘value’.

You can afford nothing. Indebted Canadians can afford nothing.

We lived in over-hyped extreme debt based economy at least 50 % above our means, now to equalize we have to live for quite some time at 50 % below our means.
On average 35-40 % from current ‘standard’.

Good ahead and buy that property, you believe what you wrote.
If it is a condo in GTA/Vancouver you are writing your financial death sentence.

1. My good health and my family’s
2. No disasters where I live (as in Tsunamis, hurricanes, and earthquakes, so far…)
3. Relatively peaceful place
4. Trudeau 2 – for legalizing Cannabis, soon. An opportunity I recognized and seized for vERY good profits (realized and unrealized).
5. Access to the Internet – where bloggers (such as this one), get to share their outlook and knowledge (whether I agree or not).

Bond markets just got shellacked in what was probably one of the greatest routs in modern history. What an interesting day in the markets. Yields up, prices down, stock markets reacted predictably by shedding value. All the makings of the perfect storm. All we need in Canada is T2 to lose next year’s election and the rest is just a bunch of spare parts coming together in a predictable format.

Look for the following in the next year: mortgage interest rates will shoot skyward. This is not just a product of the bond markets, this is a product of speculation on the part of the big banks. If you figure that five years from now, the BOC rate will be above 4% (which is very likely) then you price that into your offerings. We have had a weird period where banks did not believe that interest rates would ever go up again. Thus, cheap credit offered freely.

However no banker in her right mind is going to offer cheap credit if the bond markets are getting trashed and interest rates are on a relentless creep upwards. You want to raise interest rates you are offering to borrowers and you want to raise them to the sky.

You are going to see some over leveraged companies take a haircut on their market caps. A few will fail. Small caps are going to get decimated. Any company that is relying on junk bond funding will not survive this.

The amount of priced in low interest rate equity boost in the cost of an average home in the average Canadian City is going to evaporate. This is just math. The higher mortgage rates get, the lower you can sell your house for, because people can’t borrow as much.

So the new thing is figuring out how to make money in a high interest rate environment where there is an expectation that interest rates will continue to go up forever. Is that not the weirdest thing you have ever heard?

Trump is neither a genius nor a moron. The truth is the President has NO impact on the economy of the country. Bush or Obama did NOT create the recession. Nor the congress, republicans, democrats, independents have any impact on the economy. Trump’s policies including tax reforms have ZERO impact on the short term. It can only have an effect on the medium/long term. The economy and the stock market would have surged whether a republican or a democrat occupied the White House. Only the policies of the Federal Reserve has an impact on the economy and market has reacted according to Fed interest rate policies. In terms of the employment situation, more jobs are created in almost all countries of the World led by America. Unemployment rate has declined even in Canada. Did Trump cause an increase in employment in Canada or other countries around the world?

“People won’t have time for you if you are always angry or complaining.”

And as far as the Renter Dude, you’re not a loser and I’m right there with you.

When moving back to TO, I was unable to sell my East Coast home in an over-built area. I became a reluctant landlord, with all the pitfalls that brings. At the same time I was trying to buy in TO. I was going to buy in TO during the peak and my Dad gave me some simple advice after the 3rd failed offer. “If you buy under this type of pressure, there is no way you won’t come to regret it.” Wisdom comes with age because you fail and have the lessons of experience. I was smart to listen. I would have been carrying multiple homes, one purchased at the peak.

I stayed renting (I have never been a renter before). I began to understand the freedom of choices instead of the mindless following of what we are supposed to do.

With this came a different way of looking at my life. What if I looked at my resources: time, saving, etc. as true resources. Resources to make choices that truly reflected what I wanted.

I quit a 70 hour, constant stress-inducing, 6 figure income job just because it sucked. I worked for years and sacrificed many things to get there but when I did, I realized it wasn’t what I imagined. Renting allowed me to pivot. Some may get this clarify with a mortgage in TO but this wasn’t the case for me. Renting was complete freedom.

After a couple of months I started my own company because I had so much less to risk. Within 4 months I had replaced over 1/2 my income while only working part time at this point. I’m present with my family, I have lunch with friends I haven’t seen in months, I go to the gym. I live my life, not the life someone said I should live.

As Garth says, resources are limited and you should be diversified. I like to think that part of what he is really trying to teach us all…financial diversification & LIFE diversification. That’s his “mojo” that I’m sure contributes to his success.

Chose your path and remember there isn’t just 1 path to happiness. For that I give thanks!

Renter Dude I’m happy to say that I’m right there with you. Cheers.

P.S. – The TFSA, RRSP & Investment Accounts continue to receive all the money each month that I’m not spending on a mortgage, repairs, maintenance, etc.

Canadians got sucked in the biggest debt trap of all time. Now with the carbon taxes from Trudeau Federal Liberals coming in 2019 which will increase everything in cost some are showing anywhere from $2,000 to $3,000 a year per household.

Why not do us all a favour and just jump off a bridge? I regrettably read the comments on this blog at times. I thought Smoking Man was the worst.. but you are without doubt the most useless piece of sh#t i have ever come across.. and that is saying something.

#19 Ex Pat Canuck on 10.05.18 at 7:31 pm
Which Beatle were you emulating, Sir Garth, and did your band do any Beatle covers? Post a photo for the blog dog faithful? Pretty please?

It’s a long weekend and I think we should run with this.
I will say that Garth would be most suited as Beatle ‘John Lennon’. Because he ‘calls them as he see’s them’ and isn’t afraid to point out the elephant in the room. The Beatles were more popular than Jesus Christ, Lennon once said. Shocking. But maybe the statistics supported the statement. (?). Their music is enduring. Like Garth.

5 years is a long way to assume BOC rate will be over 4%..we are maturing in this economic cycle and some say a US recession could be starting 1-3 years, especially since the market thinks FED is not going to stop hiking interest rates anymore.

Re: #127 crowdedelevatorfartz on 10.05.18 at 10:04 am
@#112 Where’s the Money Greedo
“Just look at what happened with the Expo lands in Vancouver that were sold for pennies (by Gordon Campbell Socreds) and then the taxpayers had to pay for the clean-up.”
++++
As much as I detested Gordon Campbell ( and Christy Clark, and Bill Van Der Zalm, etc)
I believe Gordo was still in university in the mid 80’s.
++++++
I was alluding to Gordon Campbell was mayor of Vancouver from 1986-1993 when the lands were sold. He was a real estate salesman and developer before that. https://en.wikipedia.org/wiki/Gordon_Campbell

I wish Boom (WI Retiree Boomer) was still with us. A moderate, common sense and gentle dude.

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Het WULLY,sorry to leave you hanging, busy at work.

I am currently working on a house that will probably be worth 8-9 million, and they have been at it for 4 years and all of a sudden they want in before Christmas.

A bit of déjà vu,as the same thing happened last year,almost identical except that one was an 18 million dollar build.

I think part of it is these guys were happy to take their sweet time and cut no corners when things were exploding, and now I wouldn’t be surprised if they just want to live in them for roughly a year and then flip them.

I sometimes work for some Chinese /Canadian developers and while some developers have gone super quite, the latest word is that they are going to proceed with some new builds but cut back on crown mouldings and panelling in hallways and features walls and some of the finishes.

They seem to believe that there is still money to be made, and it puts food on the table ,so I’m not going to try and talk them out of it.

Anyway enough about work.

I miss Boom every day.

He was a good role model for me and it wasn’t always what I had asked him,it was perhaps selfishly all the questions in life they he could have helped me with down the road.

Me and him had a similar sense of humour too.

I don’t really have anyone to ask certain questions about certain topics,and my father in law grew up in Fiji and didn’t get the best education, maybe grade 4/5 here.

I have to help explain things to people in my wife’s family and compared to the intellectual geniuses on this blog I am a dumbo.

The fact that I am considered the smartest one in the family scares the crap out of me.

No wonder they pray twice a week.

Mercy.

Blog is going alright,I don’t link it to any social media or try to grow it, but I get around 100 visits a day.

People seem to appreciate the effort.

You never know who is interested in the historic happenings going on in Vancouver real estate.

Yesterday I had my first visitor from Saudi Arabia.

Dunno, they could be interested in real estate or they thought Pink Snow is the new name for Black Gold…

I wish Boom (WI Retiree Boomer) was still with us. A moderate, common sense and gentle dude.

/////////////////////

Het WULLY,sorry to leave you hanging, busy at work.

I am currently working on a house that will probably be worth 8-9 million, and they have been at it for 4 years and all of a sudden they want in before Christmas.

A bit of déjà vu,as the same thing happened last year,almost identical except that one was an 18 million dollar build.

I think part of it is these guys were happy to take their sweet time and cut no corners when things were exploding, and now I wouldn’t be surprised if they just want to live in them for roughly a year and then flip them.

I sometimes work for some Chinese /Canadian developers and while some developers have gone super quite, the latest word is that they are going to proceed with some new builds but cut back on crown mouldings and panelling in hallways and features walls and some of the finishes.

They seem to believe that there is still money to be made, and it puts food on the table ,so I’m not going to try and talk them out of it.

Anyway enough about work.

I miss Boom every day.

He was a good role model for me and it wasn’t always what I had asked him,it was perhaps selfishly all the questions in life they he could have helped me with down the road.

Me and him had a similar sense of humour too.

I don’t really have anyone to ask certain questions about certain topics,and my father in law grew up in Fiji and didn’t get the best education, maybe grade 4/5 here.

I have to help explain things to people in my wife’s family and compared to the intellectual geniuses on this blog I am a dumbo.

The fact that I am considered the smartest one in the family scares the crap out of me.

No wonder they pray twice a week.

Mercy.

Blog is going alright,I don’t link it to any social media or try to grow it but I get around 100 visits a day.

People seem to appreciate the effort.

You never know who is interested in the historic happenings going on in Vancouver real estate.

Yesterday I had my first visitor from Saudi Arabia.

Dunno they could be interested in real estate or they thought Pink Snow is the new name for Black Gold…

“Here everybody is rich, life is beautiful, there is plenty of energy and young people everywhere, economy is booming, constant influx of rich immigrants, real estate will keep going up as everyone wants to live here (it is very cheap, ‘buy now or be priced out forever’, but ‘always is good time to buy’ ?!?, ‘your missed the train’,…), prices are going down (there is ‘deflation’) wages are going up.”

Finally a positive post from the one and only Stan the Man Brooks! Happy Thanksgiving Stan!

You are kidding I hope. Are you just that naive or a low information voter.

Any dollar you make in canada whether its a business, wages oir investments is not so quietly being destroyed on the other end.

Garth is wrong to advise people to stay invested in canada. Its entering secular stagnation that will persist for generations. The US is the only place to put a buck but hey good luck with the dope market. It will be all thats left in this liberal hell hole.

“Good ahead and buy that property, you believe what you wrote.If it is a condo in GTA/Vancouver you are writing your financial death sentence.”

Au contraire Stanley. If you would only watch my show Hot Property on CP24 you would realize now is the time to buy. You delay at your own peril Stanley. Now get out of the rat infested basement and take the plunge!

@#26 Where’s the money Greedo
“I was alluding to Gordon Campbell was mayor of Vancouver from 1986-1993 when the lands were sold. He was a real estate salesman and developer before that….”
+++
You are correct.
My memory isnt what it used to be.
Alzheimers or alcohol…take your pick

“Why not do us all a favour and just jump off a bridge? I regrettably read the comments on this blog at times. I thought Smoking Man was the worst.. but you are without doubt the most useless piece of sh#t i have ever come across.. and that is saying something.”

Now, now John. As an intermittent reader you may have failed to realize that poor Stanley is confined to a mental ward. He posts when they let him out of his straight jacket for a couple of hours a day then back to the padded room and straight jacket. Please have sympathy not hatred toward poor Stanley…

@#29 Mtl Mike
“the last two days wiped probably all recent ‘gains’ so far this year. 2018 is looking to be a flat year, lowering my expectations to 1-2% range if all goes well.’
++++
Relax.
The markets always crap their pants in Oct.
( I’ve always had a theory that it has something to do with the Summer vacation bills arriving in the mail and Christmas just down the road….)
Anywho.
You should been around in Oct ’87 when the markets REALLY crapped their pants!
I was there in the Vancouver CM Oliver trading floor on “the day” and then the “day after”.
Fugly.

#23 the Jaguar on 10.05.18 at 7:51 pm
#19 Ex Pat Canuck on 10.05.18 at 7:31 pm
Which Beatle were you emulating, Sir Garth, and did your band do any Beatle covers? Post a photo for the blog dog faithful? Pretty please?
……………………………..

Obviously, I am a dip buyer but I just HAD to give a dig at the aforementioned, two days line.. I did a rebalance on the Jly dip in Aug but that was a wasted effort.

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#46 crowdedelevatorfartz on 10.05.18 at 8:53 pm
@#29 Mtl Mike
“the last two days wiped probably all recent ‘gains’ so far this year. 2018 is looking to be a flat year, lowering my expectations to 1-2% range if all goes well.’
++++
Relax.
The markets always crap their pants in Oct.

////////////////////////////////////////////////////////////////

Agreed, I can’t say why that is either, didn’t think of Visa Cuba vacation bills as a factor.

Having lived through 2001 and 2009 I know what real 50% loss feels like. Just say I can’t ever view active mutual funds the same since…

Happy Thanksgiving Garth and all bloggers!
You have been my unavoidable reading/break for years and you made me laugh so many times…you are a true writer and a fun mentor. And you are just so perfect in your rare imperfections, just enough to say “I don’t totally agree”. How do you do it? :)
Thanks for your time and wisdom.

I have an offer in on a house and sorting out financing…..likely going to go for it pending inspection…..need to decide on variable or fixed though….I know rates will swell up for sure but how much for how long?

#169 Gravy Train on 10.05.18 at 5:47 pm
#155 n1tro on 10.05.18 at 2:41 pm
“Trump can start by denying people who are already sick from being covered on the backs o[f] healthy people.” Let’s all hope and pray you never get sick, you doofus! :)
————————————-
Why would I pray never to get sick? It will happen to all of us. When it does, deal with it. Want to mitigate some of the pain that will befall all of us? Buy some insurance when you are healthy and pay the lower premium for being healthy. Down the road, in case you get sick or die accidentally, what you paid in helps you or your family get through the ordeal.

If you don’t die or use your benefits during the period allowed by your policy, the insurance company gets to keep your premiums.

It’s a fair deal….until you get charged a higher premium despite being in good health and buying early because you got to co-pay for someone else who is sick or dying.

Put it another way…is it fair your car insurance premiums go up to pay for a convicted drunk driver?

Thankful I got to live 16 years (almost) like an imperial citizen. I bitched about it, but, in retrospect, nothing compares to it. My country of origin is going down the drain, and most EM seem to be circling the drain also. I’m pretty sure that’s about if for both EMs and DMs.

US national debt at the end of fiscal 2018 is $21.48-trillion and they’re hammering it higher. Let the Fed raise rates and we will see where it cracks first. They’ve learned absolutely nothing from the recession of 2008.

#53 First Time Buyer on 10.05.18 at 10:10 pm
I have an offer in on a house and sorting out financing…..likely going to go for it pending inspection…..need to decide on variable or fixed though….I know rates will swell up for sure but how much for how long?

If you do calculate it they should have $ 4 – 5.000 left for investments and savings, yet he still asks his parents for occasional money here and there. Many people are hooked on consumerism, and simply cannot live within their means. Just wait when there is a need to reno the home or put your offspring through post secondary and help them with rental accomodations. They still did not max out their TFSA, this should be a no brainer. I just don’t get some people now days! A life should be much simpler: borscht at home, meat once a week, used camry, house hockey, free sports like hiking, travel max once a year. You can save and invest the rest, will be a multi millionaire by mid sixties, but no, everyone wants their quick fix now.

Attention all pot heads, related pot job worker people, anyone who owns any pot sticks, (like a primary position in a pot stock ETF), and everyone who works for government or private pot related companies or agencies or crown corporations in any capacity. You can be banned for life from entering the USA, and experts on the subject ( lawyers and stuff) advise you in no uncertain terms to quit your job in pot and sever your ties before you are caught up in the giant net.

My personal belief is that this very negative aspect of a non relationship with the USA was caused by Trudeau Liberals deliberately miscalculating and misleading all parties concerned.

But, if you can take the ban, and understand you will also be placed on the no fly list which includes not being able to fly over the US through US airsoace, say, to Mexico, because you have to register 48 hours in advance, then the ban is OK.

Personally, I would listen to the lawyers and not Trudeau or Goodale. They are telling you one thing, the US Border Services ate telling you another .Who are you going to believe. Smoking pot is a vote for Trudeau.

If you are in the GTA or the GVRD, or one of the surrounding municipalities, I would recommend terminating the deal and waiting for a while to see how this shakes out. If you are somewhere else then it’s probably better to go fixed in the current environment.

Not sure why you are putting up a 43% downpayment unless you are in the GTA or the GVRD. I would keep the money and invest it.

The machine lives, I still have a gig in spite of all the HR interviews

So you’re smoking man they say. I said yeah. Thanks Janes. It’s futile to pick a war with a real artist. Like me.

Yeah. I’m on linked In. Face book and twitter.

Christ I’m secret communist. I know where my bread gets buttered.
So I play along.

No I’m a certified drunk, knows how to play fx and the herd. So you won’t see me at a united way campaign as a speaker bitching about how bozze destroid my life. It made mine better. JS is a wimp. I’m not.

400 to 1 margin in forex.. That’s crazy shit. Take all the help I can get.

I’m a hero in cap markets, but they can’t say it officaly.

Great instincts for the boys back home. Come to America. Were there is no price on pollution.

Heard and seen this song and dance of the catechism of fortunate Americans (e.g. with a private company health plan) who view others’ health problems as a moral failure or lifestyle issue – ‘ why should I pay for…’.

Old saw ‘a liberal is a conservative who hasn’t been mugged’ works in reverse as a ‘conservative is a liberal who hasn’t gotten really sick’…

I just don’t get some people now days! A life should be much simpler: borscht at home, meat once a week, used camry, house hockey, free sports like hiking, travel max once a year. You can save and invest the rest, will be a multi millionaire by mid sixties, but no, everyone wants their quick fix now.

****************

Excellent comment. But you know, it’s harder than it sounds to avoid The Trap.

I recently had a conversation with my mother; she had a long career as a savvy financial planner (you might call her [email protected]!). In the context of some financial discussion, she made some offhand remark like, “Oh, but you know, you’ve always been so good with money!” I didn’t have the heart to tell her, “Well… yes, but…”

What ensnared me was the hideous pitfall of *normalization*. We have a society – and it’s been done very intentionally, by shrewd marketers and others – that promotes a vision of “normal” that is totally out of step with what “normal” people can or should be able to afford. When you finally earn that degree or professional certification (as I did), and begin making real money, and you look around at all your friends purchasing new-model cars, homes, etc., it becomes an almost subconscious thing: this is just what people in your social sphere “do”. It’s exceedingly difficult to avoid the “normalization” trap, even if you THINK you’re a financially-prudent person. Anyone can get sucked into it.

One of the best pieces of financial advice I read before I got married was: be careful of materially increasing your lifestyle, because once you do, it’s hard to go back down. This is true, and worth heeding for anyone.

Another snare to be wary of is pride: without going into detail, at one time, there was a purchase that we made at least partially because I couldn’t abide the idea that I couldn’t (or shouldn’t) afford it. Don’t let this emotion rule you!

Here’s an example of a decision we made recently: we sold our family camper trailer. It was a move we had been considering for a while, and I decided on it firmly after hearing a lady at church telling the children that when she was a child, in the summer, her family used to sleep out in the yard at night with only blankets because they couldn’t afford a tent. I heard that story and I thought to myself, Good Lord, what have we normalized?

Frugal is the way to go. It’s a robust sociological finding that material comfort doesn’t increase happiness beyond a (surprisingly low) point.

Canada’s housing market is in a bubble that’s set to burst and prices could plunge by as much as 25 per cent, a major independent research firm warns.

“Housing valuations have lost all touch with fundamentals and household debt is at a record high,” economists at the research consultancy Capital Economics say in their most recent Canada Economic Outlook, issued Wednesday.

Now is 3 times bigger in the big cities and will take the whole fake economy with it.

The seamlessly limitless credit card has just expired. The debt orgy is over. Good luck in getting a loan from the bank.

#57 n1tro on 10.05.18 at 10:40 pm
“Put it another way…is it fair your car insurance premiums go up to pay for a convicted drunk driver?”

I don’t think you understand the concept of insurance!

There are actions one can take to obviate the onset of various medical conditions: healthy eating and regular exercise, not smoking, not drinking to excess, getting proper sleep, and having a positive mental outlook, good coping skills and driving habits. Sorry, but that lets you out, Smokey! (You’re too far gone.)

But one can still become sick or injured through no fault of one’s own—from heredity, accidents, environmental factors, age-related impairments, and so on. That’s the whole point of buying insurance: to protect oneself from unanticipated factors beyond one’s control.

“I am doing you favors for quite a while folks, you have PhD teaching you for free here, but you refuse to listen.”

Yes Stanley we know you have a PhD in teaching. Now let’s put your Nobel Prize back on the shelf and your Governor General’s Award can be tucked back in your dresser. Time for your meds Stanley and then back in the straight jacket until your next post. Come along Stanley, put down the keyboard, it’s injection time….

Thanks for the responses (comment 53)……I’m in Calgary and buying a seems to make sense for my family right now……and understand the advice sit on the side and wait for a bit longer….asking mostly from a variable vs fixed interest rate perspective….thanks!

#77 Gravy Train on 10.06.18 at 8:51 am
#57 n1tro on 10.05.18 at 10:40 pm
“Put it another way…is it fair your car insurance premiums go up to pay for a convicted drunk driver?”
I don’t think you understand the concept of insurance!
There are actions one can take to obviate the onset of various medical conditions: healthy eating and regular exercise, not smoking, not drinking to excess, getting proper sleep, and having a positive mental outlook, good coping skills and driving habits. Sorry, but that lets you out, Smokey! (You’re too far gone.)
But one can still become sick or injured through no fault of one’s own—from heredity, accidents, environmental factors, age-related impairments, and so on. That’s the whole point of buying insurance: to protect oneself from unanticipated factors beyond one’s control.
Do you get it now? Or am I trying to teach a deplorable? :)
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Wow…name calling. Is that your typical go to resort?
As for understanding how insurance works, you just repeated what I said but somehow twisted to fit your narrative. The original premise was to not make others subsidize insurance for people already sick or dying as it is counter intuitive to how insurance works (which is based on discrimination) and how people want to pay for things they hope never to use.

Like it or not, that’s how the current system works. Of course you can be a healthy individual and have life give you the raw end of the deal and need a crap load of medical services in the future. That’s why insurance exists. The policy was given to you by the insurers in hopes you never use it but if you do, it draws on the collective pool of others who are unlikely to use to pay for you.

Add in people who definitely will use the benefits into the pool and guess what happens? Everyone pays more and not everyone wants to do that.

Great post. And may I add that without one’s health and love of family and friends, none of that material stuff really matters at all. In fact, striving to”having it all” just because “every one else does it” actually causes a lot of stress, and may result in illness and unhappiness. That’s not say one shouldn’t have financial goals ( investments, purchasing a home etc.); however, for peace of mind you should live within your means and for most people, frugality is the way to go.

@#79 Lord Stanley’s Headshrink
“Yes Stanley we know you have a PhD in teaching. Now let’s put your Nobel Prize back on the shelf and your Governor General’s Award can be tucked back in your dresser.”
++++

Your quick diagnosis: general mental disorder combined with severe form of verbal diarrhea (Snowed-Ct code: 74732009) due to constant stress as of that mortgage or loss of real estate related job (aka as the syndrome of the empty stomach).

Can’t help you as the medication for your case is already prescribed and is being administered in the form of higher rates, higher taxes, inflation, wage constraints.

I only can recommend lubricant and some form of sedative (as you are using pot anyway) as it will hurt.

My med for today is being warmed up, it is a few shots of Courvoisier.

Real wages in the US are barely up. Also, when you factor in huge annual health insurance price increases, higher rents (not included in CPI) and runaway housing prices (not included in CPI),the average person in the US is not getting ahead today. That may change in the future but so far most of the wage gains have gone to the top earners when you dig under the sheets of the average figures. Things are descent for sure but not as rosy as you and Trump say :-)

“One of the best pieces of financial advice I read before I got married was: be careful of materially increasing your lifestyle, because once you do, it’s hard to go back down. This is true, and worth heeding for anyone.”

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Yes!
Plus:

Look long and hard at the parents of your intended.

Because that’s what you will have in 25 years.
Or sooner.

Happy Thanksgiving Garth and family…thank YOU for giving us this blog.

Nevis, a solitary volcano in the Caribbean with a population of just 11,000, which has been implicated in some of the most sordid financial scams of modern times, from Britain’s biggest-ever tax fraud to the fleecing of 620,000 vulnerable Americans in a $220m payday loan scam. The story of Nevis reveals the difficulties the world faces in trying to put an end to tax evasion, fraud and kleptocracy.”

…”Last year, information on 70,000 Nevisian companies was leaked as part of the Paradise Papers investigation, but that didn’t help us find out who owns them: ownership information is so secret there that even the island’s own corporate registry doesn’t know. In other words, there was nothing substantial to leak.,,,’

“The only good thing that Donald Trump could do, if he was ever so inclined,” he said, “is take a battleship and roll it up to Nevis, and literally train the guns and say: ‘Get rid of these bullshit laws or I’ll blow you to kingdom come.’”

In short, he said, “A bright light needs to be shone on this cockroach.”

My bad! Yes another one of Stanley’s imaginary awards to go along with his imaginary credentials…. We humour him at the mental ward. Keeps him happy. He loves it when we call him Dr. Brooks. Puts a smile on his drooling face…..

Back in the day a reporter waggishly asked of Gartho: Are you a Mod or a Rocker? He replied: I’m a blogger.

Way ahead of his time.

…

With MJ legalization coming what are the chances the person in business/service you are dealing with, as you pay your sky high cartel prices in Kanada, is High AF, Slightly High, Coming Down, or looking forward to be High AF. Hey I got a doctor’s note it’s okay.

T1 hit us with weaponized debt; T2 nailing us with drugs. Your neighborhoods soon to be filled with criminal and addicts coddled in the law-enforcement no-go zones known as “Safe Injection Sites” [sic].
They’ll stone you just like they said they would.

Well look on the bright side. For years we Canadians have been complaining about high house prices, especially in grossly overprices Toronto and Vancouver. We elected governments that tried to “fix” the problem by making it harder for buyers outside the province and it had limited effect. That should tell you that foreign buyers weren’t the problem. It seems ironic that in a country where most of us have a dim view of Donald Trump that the actions of his administration have a good chance of bringing house prices to within sight of sensible if you have a good telescope. Who would have ever thought Donald Trump would make Canada great again?

“We have not experienced this situation in the past where a painting spontaneously shredded, upon achieving a record for the artist,” Branczik said. “We are busily figuring out what this means in an auction context.”

Enjoy this weekend everyone. Lots of open houses in the GTA to visit. At mine we are handing out free pumpkin spice lattes for your pleasure, too.

Thanksgiving is like a home, it brings families together.

Don’t be left out. Buy your next home now while interest rates are lower and prices are too. You can purchase many properties and close in the GTA in time for your kids to enjoy Halloween at the new place.

And then Christmas is right around the corner. Enjoy the wonderful seasons ahead in your new home.

Dude, never mind the naysayers. Do what’s best for you and your family. My wife and I have been renters for the last 7 years and couldn’t be happier. As our portfolio approaches seven figures and the cascade of dividends increases every year it’s become apparent that we will never buy unless the market seriously corrects or crashes. As I like to say, we not only live in our awesome downtown condo for free, but we GET PAID to live in it. That’s right, once you cross that crucial point where your passive income covers your living costs (rent, utilities and renter’s insurance), every dollar afterwards is like little slices of the sweetest cherry pie.

Our dividends and interest (from registered accounts, natch) now cover ALL of the following: living costs, gym memberships, internet, mobile, and gas. Keep in mind that this doesn’t take into account the actual growth of our balanced, diversified and liquid portfolio!

Is it any wonder I never tire of singing the praises of the Bearded One? I may not agree with everything he says all the time, but anyone who actually listens to the message of this blog will make out like a happy bandit.

After all, why risk money buying stocks paying 3% or 4% which could lose capital value when you can get a risk-free government bond coughing out 3.2%?

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Exactly true.

For a very long time, prior to the obscene financial crisis caused by the fraudulent financial firms in the USA, regular savers in North America were able to obtain ‘reasonable yield’ through fixed income investments like bonds, GICs, etc.

For the last 10 years, this has been impossible, and savers have been punished mercilessly.

So money has flowed into other investments, in order for those with any savings to either have a chance of retirement some day, or to maintain a reasonable living standard while retired.

As this blog has maintained, a balanced approach to investing this way is the best way to generate reasonable returns as well as to survive while retired for 30 years or retirement without running out of money.

While I agree that investing in this manner will provide returns that are historically better than investing in secure bonds, this is especially true over the past 10 years where bond prices were abnormally low due to the artificially low interest rates required to salvage the worlds economy from the greed, fraud and stupidity that caused the GFC.

Garth’s statement above is spot on.

But why should savers have to choose between either pathetic fixed returns (as they have had to over the past 10 years) or volatile and higher risk returns that even a balanced portfolio provides.

In 1960 the 10 year GOC bond rate was around 5%.
In 1980 the rate was 15%.
In 2000 the rate was 6%.
In 2017 it was 1.78%.

So for 40 years, prior to the GFC, bond yield were pretty reasonable.

And yes, one must take into account rates of inflation.

But the rate of inflation, for those who save, or who have savings, can be managed.
For the retired, or for savvy or frugal consumers, consumption can be managed.

Car prices are rising 5% every year? Well smart consumers will not buy new cars, or will do continue to drive the old ones longer.

Travel prices rising due to fuel prices and exchange rate woes. Travel closer to home, different locations , or not at all.

There is always a way to decrease consumption and to mitigate the effects of inflation.

However, until the last 10 years savers could achieve a ‘reasonable’ return on their savings through secure fixed instruments.

That these rates are returning to ‘normal’ is a good thing.

For those that want higher returns, and have a better risk tolerance, or who have the time to recover from the ups and downs of equity investments (be they high yield instruments, preferred shares, market indexed diversified around the world etc) balanced or not, they will have that option.

For those less interested in these types of investments they now have another option.
Because while these equity investments may be rooted in certain fundamentals, they are more and more often influenced by the fears and rational or irrational exuberance of the pack, or through computer algorithms that have propensity to run amok.

And today, they are highly influenced by the social and ideological stupidity of governments of all types.

Whether it be energy industry killing policies, social justice trade bullshit, and weed industry hype policies of Canada’s idiot government, or global domination, social, economic and military policies of the Chinese, or renewed nationalist policies of countries pushing back against 30 years of uncontrolled globalism (USA , Britain Europe to come), or just the continued fraudulent policies of the financial firms that learned no lessons over the past 10 years, mainly because there were no consequences to them for their almost destroying the worlds financial system.

There are some who have spent prodigiously over the past 10 years, buying overpriced chipboard homes and carrying maximum mortgages at lowest rates, (at least 1 to live in, and maybe a few more to rent), maxing their LOC for annual vacations, or who believe that spending $200 a month on a cell phone and upgrading to the newest i-phone every 2 years is a basic human right.

Who live paycheck to paycheck and make minimum payments on their credit cards, and who really don’t care about what items cost in total, so long as they can ‘make the monthly payment’.

These are the people who will be creamed with higher rates. And rightly so.

Interest rates from 1960 to 2005 were the norm, not the outliers.
Rates from 2005 – 2018 have been the outliers.
That rates are finally reverting to the norm is a good thing.

And they are reverting to the norm, primarily due to the economic polices of the current American president. A fact not lost on millions of American voters.

They are the ‘Deplorables’ who were financially crushed by past globalist and military policies of their own governments (Democrat and Republican) , and who are still irate over the bailout of Wall Street and indifference to Main Street, and whose savings have been killed by the resulting low interest rates of the past 10 years.

Why anyone would want to sink money into a Toronto house..the leading Marxist candidate for Mayor is trumping up a gender neutral policy for council, committees etc. How’d this expensive stance of non-sense work out during Nafta?

Given the infinite molecular combinations that could have manifest out of the primordial ooze, we get to appreciate the light of day.

There isn’t a morning I don’t thank my lucky stars for this.

Even with the political freak shows we’re currently privy to, the misery our world desperately needs to heal and the unsung heroes needing recognition, it’s still a miraculous, incalculably beautiful life.

For this, all of the amazing souls in my life and the incredible bounty I enjoy, I am forever grateful.

#85 n1tro on 10.06.18 at 10:23 am
“[…] see…no name calling or anything to get my point across.” You missed my point entirely! If you do think you understand my point, then paraphrase what you think is its very best version. I bet you can’t!

I’ll start us off by paraphrasing—to the best of my ability—the best version of your point, and you can correct my deficiencies. At least then we can get to a closer version of the truth!

“I am young and healthy. No one in my family has ever had any major health conditions—to my knowledge—so I won’t ever have any either. I will never require medical services as a result of old age, a car or industrial accident, natural disasters, an unhealthy lifestyle, my proximity to unknown environmental toxins, and so on. Why should I be co-opted to co-pay for health services?”

Jess at 78 posted a great link explaining among other things how tax havens and low corporate tax rates benefit the very few at the expense of the many.

“Underpinning all this is the fallacy of composition, whereby the fortunes of our big businesses and big banks are conflated with the fortunes of our whole economy.”

In other words there is no “we” in economics. You have an income and a wealth as do I. You or I may have some debt. “We” Canadians most certainly do not have a GDP or a collective wealth. Not in the sense that a higher GDP necessarily benefits you or I as it would it were truly “our” GDP. It’s a complete myth.

I dont know who is in charge of pipeline but faster we start building it less money for head cutters. Or we all talk…

In the latest campaign, Omar Abdulaziz, a Saudi activist and Montreal resident, was targeted and infected with NSO Group’s Pegasus spyware, according to Citizen Lab. The targeting occurred while Abdulaziz, who recently received asylum in Canada, was attending McGill University.

Citizen Lab’s Masashi Nishihata explained in a session at Virus Bulletin 2018 in Montreal this week that while performing a global mapping of NSO’s Pegasus infrastructure, the group identified a suspected Pegasus infection located in Quebec. It was carried out by what researchers “inferred to be a Saudi Arabia-based attacker,” he added.

Newstapa held sting operations at one of the international conferences hosted by WASET, aiming to explore how the fake society runs fake journals and conferences. We first generated a fake research paper using a program called ‘SCIgen,’ an automatic thesis generator built by MIT students, and submitted it to one of WASET’s conference. The program is designed to make papers with random texts available online in a format that looks like a normal research article. The fake paper was selected for presentation at the conference held in Venice, Italy in June, where we successfully completed presentation.

I just copy and paste the numbers that realtor Paul B posts. I think there were a LOT of expired listings which happens at the beginning of the month so that is why the inventory did not increase. These days a lot of sellers are resisting so they can hide the fact that the home has been on the market for 120 days.

“In 2000 the rate was 6%.” The inflation rate was 2.82% in 2000, so the real bond rate was 3.18%.

“In 2017 it was 1.78%.” The inflation rate was 2.84% in 2017, so the real bond rate was (1.06%).

So for 40 years, prior to the GFC, bond yield[s] were pretty reasonable. No, it’s nonsense to compare nominal bond rates across time; it only makes sense to compare real bond rates, so as to eliminate money illusion. As you can see, your entire argument is moot. :)

“And yes, one must take into account rates of inflation.” And yet for some reason you didn’t! :)

Dude, never mind the naysayers. Do what’s best for you and your family. My wife and I have been renters for the last 7 years and couldn’t be happier. As our portfolio approaches seven figures and the cascade of dividends increases every year it’s become apparent that we will never buy unless the market seriously corrects or crashes. As I like to say, we not only live in our awesome downtown condo for free, but we GET PAID to live in it. That’s right, once you cross that crucial point where your passive income covers your living costs (rent, utilities and renter’s insurance), every dollar afterwards is like little slices of the sweetest cherry pie.
___________________________

I find it amusing how some like to brag about how wealthy they are on here.
Very interesting, wonder what the motive is.

“Your math on the nominal bond rate (ie. 10-year yield less inflation rate) may seem sound but is in fact nonsensical.” Wrong again. The 10-year yield less the inflation rate is the real (not the nominal) bond rate. Finance 101. Maybe take a course or two—unless the admissions officer says, “No, it’d be a waste of your time—and ours!” :)

“A 10-year yield on a bond is an actual yield that can be obtained on savings.” Yes, this is the nominal (not the real) bond yield. Maybe Garth has the time, energy and patience to explain it all to you. :)

Fort McMurray isn’t in any of them. It’s in the boreal plains ecozone.

More time and money has been spent trying to make this website comply with the common-look-and-feel standard than has been spent updating the underlying data. The common-look-and-feel standard says that blind people have to be able to see the data. The bureaucrats responsible for the common-look-and-feel threaten to shut down the website. If they can shut it down, they can take credit for enforcing the standard.

#122 Gravy Train on 10.06.18 at 7:44 pm
“Your math on the nominal bond rate (ie. 10-year yield less inflation rate) may seem sound but is in fact nonsensical.” Wrong again. The 10-year yield less the inflation rate is the real (not the nominal) bond rate. Finance 101. Maybe take a course or two—unless the admissions officer say
s, “No, it’d be a waste of your time—and ours!” :)

————————————-
You have great understanding of theory and are obviously a great book learner.
Hey it says here on page 107 of my intro finance book that that ‘nominal rate’ = ‘bond rate’ less’ inflation rate’.

Bravo. You can read and regurgitate theory!

But theoretical calculations of nominal bond return
(10 Year yield less inflation rate) have little to do with the reality of the real economy and how actual people live in it on a daily basis.

So sure, your book learned definition of nominal return is spot on.

But the real world examples I gave, are far more important in describing the effect of interest rates and inflation, and how real people in an economy are affected by rates and inflation.

Your nominal rate model assumes a 10 Year yield is fixed. True
It also assumes that the annual inflation rate applies to all items for sale in an economy, and that all spending by a consumer for that year will rise by the inflation rate.

This is utter nonsense.
As described, in real life consumers will substitute more less expensive items for the more expensive. Or reduce their consumption.

Your theoretical view of the world is only a base for understanding economic theory.

An individual consumer, depending on circumstances and spending intelligence, can easily make his/her ‘nominal rate’ far higher.
Not because they can increase the bond rate. But because through their spending habits, they can reduce the effects of inflation.

And, as I indicated several times, this is far easier to do when bond rates are higher than when they are lower.

But hey, you keep thinking in high level, theoretical terms, and I’m sure that this will serve you well in life.

“But hey, you keep thinking in high level, theoretical terms, and I’m sure that this will serve you well in life.” It has! I have a balanced, diversified and liquid portfolio of assets, and am set for life. I don’t have a care in the world, or need to work another day! How about you? :)

You have no rebuttal for the arguments other than to go back to rudimentary economic terms and theory.

Here’s another hint.
Mathematical end economic theories are nice.
They try to describe and model complex systems.

But they invariably fail due to the fact that humans are emotional and irrational and it is impossible to mathematically consider all variables.

That is why they are called theoretical models, not factual definitions.

Your belief in rational choice theory speaks volumes.

Such theories may serve to describe some aspects of economics and human nature, it to believe that it is possible for a single theory to describe all human nature and economic activity is a fallacy.

Just as scientist continue to fail to create climate models that try to model temperature changes in complex systems such as the global environment, economists have and will continue to fail to create models of economic systems influenced by human nature.

If you are content living in the theoretical world then knock yourself out.

It’s not for me to say you might be insane.

But please stop trying to project some intellectual superiority based on your defense of one of many economic theories.
You would be far better to debate the content, rather than assume that others have no understanding basic economic principles.

Your arrogance that you ”don’t have the energy of the patience to rebutt arguments’ just serves to show the inferiority of your position.

Anyone who assumes that only their position and one theory must be correct, based upon mathematical models of complex systems has little to offer, other than to spout their belief in theories and models created by others.

I would prefer to debate those that actually base their arguments on rational and considered thought, than what they read in a book in their 2nd year finance class.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.